Can a property sell above transacted prices?

When you look at recent sales data for properties in your building or the development, the transacted prices can seem like an absolute ceiling. These figures are the public record of what buyers have paid for similar properties. But is that all your home is worth? Recently, I had a challenging time trying to price a property for sale. The property has a lovely interior, is nicely furnished and in good condition.

A property’s true market value is a story, while transacted prices are numbers. Successful sellers understand how to build a strong case that justifies a premium for their properties. This often comes down to factors that are invisible in public sales data.

The hidden value in your home

Transacted prices are not always a clear indicator of market value. The most significant differentiators are often hidden from public records.

1) Condition

Two identical houses on the same street can sell at vastly different prices. One may be a dated time capsule on the inside, requiring significant improvements, while the other is a turn-key property with a fully renovated kitchen, bathrooms, and systems.

2) Quality of upgrades

Not all renovations will enhance the value of the property. The value added by premium, professional-grade finishes, high-end appliances, and energy-efficient smart home technology is substantial but cannot be seen from the exterior. Undesirable, unsightly and dysfunctional upgrades can lower the value of the property.

3) Layout

The functional utility of a floor plan—the flow of space, the abundance of natural light, the practicality of the layout—has a huge bearing on desirability. These are the intangibles that matter to a buyer.

4) Orientation

Properties with open views of beautiful scenery will normally fetch a premium price in densely populated areas where most buildings face each other.

Condominiums, terrace homes, and semi-detached houses typically have the same layout within a development. While there may be different types of units, each type usually shares the same floor plan. When comparing properties of the same type, the layout is usually not an issue, but the condition of the interior would still be unknown. You would require the owners’ permission to assess the interiors of the units you are comparing, which is not feasible.

To investigate the comparable properties further, you should speak with real estate agents who are actively involved in the sales and leasing of properties in your development. They often have insider information on recent sales and can indicate if your home can be worth more. You can also engage a property valuer to determine the market value.

I find it helpful to scour the listings on property portals. You can use asking prices as a reference, but keep in mind that these prices are often higher than the final transacted prices. If it seems unlikely that a buyer can find a lower-priced property comparable to yours, you have a good chance of securing a better price. This assumes that you are confident your property is better than similar ones listed. Your property needs to “stand out” in the market.

I managed to view a few units with a similar layout and size to mine, and I noticed a startling difference. The kind of marble used for the floor in my unit is of better quality than that in some of the others. The colour is brighter, and it has more intricate patterns, making it aesthetically more pleasing. This alone adds premium to the value of my property.

Story behind the sale

There are pitfalls in using transacted data without scrutinizing the circumstances of the sale itself. The issue arises from the recorded transactions, which contain only surface-level information about the properties. Publicly available records will only show the date of the transaction, address, building type, tenure, number of rooms, lot size/ built-up area, price per square foot, and the price. Additionally, these records are typically several months old.

These are common scenarios where a sale price is a poor indicator of market value:

1) Distressed sales

Sales resulting from foreclosure, divorce, or urgent relocation do not qualify as arm’s length transactions. They often result in a sale price significantly below what the property would achieve under normal market conditions. This adversely affects the comparable pool if they are not identified and adjusted accordingly.

2) Off-market deals

These transactions that occur in private sales, outside the competitive arena of the open market, might not represent market value. The agreed-upon price might indicate a connection between the buyer and seller or a preference for confidentiality rather than true market value.

3) Hidden concessions

Behind-the-scenes negotiations can skew the final closing price, such as the seller agreeing to cover closing costs, include high-end furniture, or make specific repairs. The recorded price is inflated or deflated by these agreements, obscuring the actual value of the real estate itself. The sale and purchase agreement usually contains these terms, but they are not publicly available.

4) Inheritance or family transfers

When a property is transferred between family members for a nominal price, these transactions reflect personal arrangements rather than a market value established through arm’s-length negotiations.

5) Properties with defects

A home sells at a discount due to damages which require costly repairs. The price compensates for these flaws and does not reflect the asset’s true value. Price adjustments can also be made to remove unwanted renovations and reinstate the property to its original condition.

6) Unusual zoning or usage rights

A property sells with unique development potential. The price indicates future speculative worth rather than its present physical condition.

7) Market Anomalies

A sale takes place during a brief fluctuation in the market, whether it’s a rise or a drop. This timing can obscure long-term value trends and is often not repeatable.

Relying solely on these as primary comparisons without modifications and explanations represents a basic mistake in valuation. If the recent transactions in your vicinity involve any of these situations, they might not be reliable indicators for determining your property’s value. However, obtaining the above information is often a challenge.

If you are unable to gather further information about the sale, you can use these transactions as a guide. Ultimately, the final price depends on demand and supply, with a willing buyer and seller negotiating in an open market at arm’s length and without undue pressure.

Position Your Property for a Premium

To secure a price above transacted prices, you must build a compelling case for your home’s value. Don’t expect to achieve a good price if you are not willing to present your property well. Make necessary repairs and apply a fresh coat of paint to make the property more appealing. Ensure your property is tidy before each viewing to give a good impression to potential buyers.

You could go further by doing deep cleaning and professional staging to create a stronger impression and enhance buyers’ perception of your place.

Compile a comprehensive list of all enhancements, detailing the brands of appliances, the kind of hardwood flooring, the roof’s age, and any smart home technologies. Quantify the investments that you’ve made.

Consider providing a current home inspection report to potential buyers to show that the property has no hidden issues.

Ensure your property is showcased effectively through professional photography and video tours. It’s essential that your property marketing targets the appropriate audience—buyers who are willing to pay for the exceptional features of your property.

Although transacted prices play a significant role, it’s possible to sell your property for a greater sum. By knowing the constraints of these data and effectively showcasing your property’s value, you can sell at a price that represents its worth.

Photo by Caroline Badran on Unsplash